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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The additional benefit received from the consumption of the next unit of a good or service
Normal Goods
Marginal Benefit (MB)
Public goods
Normal Profit
2. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Subsidy
Dead Weight Loss
Private goods
Marginal Benefit (MB)
3. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Four-firm concentration ratio
Economic Profit
Economic Growth
Decreasing Cost industry
4. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price Ceiling
Price inelastic demand
Consumer surplus
Price floor
5. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Constrained Utility Maximization
Marginal Productivity Theory
Negative externality
Monopoly long-run equilibrium
6. The most desirable alternative given up as the result of a decision
Spillover benefits
Opportunity Cost
Shutdown Point
Law of Demand
7. The difference between total revenue and total explicit and implicit costs
Total Fixed Costs (TFC)
Price Ceiling
Economic Profit
Spillover costs
8. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Constrained Utility Maximization
Excess Capacity
Monopoly
9. The total quantity - or total output of a good produced at each quantity of labor employed
Price Ceiling
Market power
Total Product of Labor (TPL)
Accounting Profit
10. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Determinants of Supply
Average Variable Cost (AVC)
Free-Rider Problem
Income Elasticity
11. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Economies of Scale
Public goods
Price floor
Marginal Benefit (MB)
12. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Income Effect
Positive externality
Unit elastic demand
Price Ceiling
13. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Specialization
Public goods
Monopoly
14. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Market Economy (Capitalism)
Constant Returns to Scale
Price floor
15. AVC = TVC/Q
Spillover benefits
Profit Maximizing Resource Employment
Productive Efficiency
Average Variable Cost (AVC)
16. When firms focus their resources on production of goods for which they have comparative advantage
Determinants of Supply
Law of Increasing Costs
Specialization
Income Effect
17. The price of a good measured in units of currency
Absolute prices
Market Economy (Capitalism)
Free-Rider Problem
Break-even Point
18. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Average Variable Cost (AVC)
Total Revenue
Marginal Analysis
Non-collusive oligopoly
19. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Subsidy
Luxury
Surplus
Long Run
20. Exists if a producer can produce a good at lower opportunity cost than all other producers
Non-collusive oligopoly
Comparative Advantage
Market Economy (Capitalism)
Spillover costs
21. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Natural Monopoly
Private goods
Scarcity
22. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Perfect competition
Cross-Price Elasticity of Demand
Consumer surplus
Spillover benefits
23. ATC = TC/Q = AFC + AVC
Unit elastic demand
Average Total Cost (ATC)
Economic Growth
Profit Maximizing Rule
24. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Productive Efficiency
Production function
Marginal Productivity Theory
Shortage
25. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Spillover costs
Cartel
Opportunity Cost
Excess Capacity
26. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Productive Efficiency
Fixed inputs
Decreasing Cost industry
27. A good for which higher income decreases demand
Explicit costs
Marginal Productivity Theory
Average Variable Cost (AVC)
Inferior Goods
28. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Constrained Utility Maximization
Law of Increasing Costs
Free-Rider Problem
Excess Capacity
29. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Profit Maximizing Rule
Break-even Point
Short run
Increasing Cost Industry
30. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Constrained Utility Maximization
Perfectly elastic
Total variable costs (TVC)
31. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Utility Maximizing Rule
Surplus
Perfect competition
Dead Weight Loss
32. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Economics
Subsidy
Producer surplus
Production function
33. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Four-firm concentration ratio
Marginal Benefit (MB)
Price elastic demand
Monopoly
34. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Marginal Resource Cost (MRC)
Free-Rider Problem
Excess Capacity
35. Ed < 1
Increasing Cost Industry
Collusive oligopoly
Monopolistic competition
Price inelastic demand
36. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Oligopoly
Utility Maximizing Rule
Price floor
Normal Goods
37. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Relative Prices
Positive externality
Demand for Labor
Law of Diminishing Marginal Utility
38. Ed = 1
Decreasing Cost industry
Consumer surplus
Marginal tax rate
Unit elastic demand
39. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Fixed inputs
Total Welfare
Oligopoly
Determinants of Demand
40. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Oligopoly
Price elasticity
Constant Returns to Scale
41. Product demand - productivity - prices of other resources - and complementary resources
Accounting Profit
Complementary Goods
Determinants of Labor Demand
Law of Diminishing Marginal Utility
42. Ed = 8 - infinite change in demand to price change
Four-firm concentration ratio
Increasing Cost Industry
Marginal Productivity Theory
Perfectly elastic
43. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Utility Maximizing Rule
Inferior Goods
Producer surplus
44. Es = (%dQs) / (%dPrice)
Price inelastic demand
Law of Supply
Price Elasticity of Supply
Luxury
45. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Profit Maximizing Rule
Average Product of Labor (APL)
Constant cost industry
Monopoly long-run equilibrium
46. The imbalance between limited productive resources and unlimited human wants
Average Variable Cost (AVC)
Economic Profit
Surplus
Scarcity
47. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Price discrimination
Implicit costs
Average Fixed Cost (AFC)
Price floor
48. The rational decision maker chooses an action if MB = MC
Explicit costs
Marginal Analysis
Surplus
Spillover costs
49. The output where ATC is minimized and economic profit is zero
Marginal tax rate
Break-even Point
Perfectly competitive long-run equilibrium
Average Product of Labor (APL)
50. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Price elastic demand
Law of Increasing Costs
Spillover benefits
Explicit costs